Due to the impact of the global recession, cotton prices have fallen steeply in Pakistan. This is creating a dual situation whereby it brings relief to the textile industry but also means that farmers are likely to get further hit as their remaining crop does not provide sufficient cover against the recent losses.
Speaking to The Express Tribune, Insight Securities Textile Analyst, Ali Asif said, “Recently, cotton prices have touched a 22-month low, mainly due to lower demand led by inflationary pressure globally.”
“Moreover, higher yield output has also exacerbated the demand and supply imbalance in the cotton market. We believe that dwindling cotton prices, along with lower order bookings, are likely to keep the textile industry under pressure,” he added.
Arif Habib Limited (AHL) Head of Research, Tahir Abbas said, “The overall slowdown in the global economy, monetary tightening in developing and emerging countries, alongside lower demand in the major export markets including the US, the European Union (EU) and China, are the key reasons for the rapid decline in global cotton prices.”
Textile Analyst, Arsalan Hanif was of the opinion that while the decline was due to a global slowdown in demand, the trend could continue, “The decline in cotton rates is due to a global slowdown in demand for cotton yarn and apparel. This declining trend is likely to continue for the next few months due to recession fears, Covid restrictions in China, hikes in interest rates and rising inflation which has impacted the purchasing power parity of customers.”
He highlighted, however, that “The decline in cotton prices is detrimental to farmers but beneficial for those manufacturing value-added garments.”
According to Abdullah Umer Khan Lodhi, Agriculture Analyst at Ismail Iqbal Securities, “The cotton market is in bearish trend on account of the recent lockdowns in China due to the new corona variant and the increase in US interest rates. The global market will become stable in December due to Christmas which will increase clothing demand all over the world.”
“Owing to the surging dollar and the prospect of a US recession, cotton is falling sharply,” said Arif Habib Commodities CEO, Ahsan Mehanti.
“The reduced cotton crop has impacted supply and consequently, local prices have been higher due to the weak rupee. Farmers have suffered due to lower crop volumes this season, while lower prices will help value-added industries to import at low rates,” he added.
Explaining the conundrum now facing the textile industry, cotton market expert Nasim Usman said, “The falling global prices have been a blessing to export industries that can now import cotton at considerably lower rates. Due to the decline in the price of cotton in the international market, mills are interested in booking cotton from foreign countries, however, due to the bearish trend in the local and international textile sector, there is a crisis in all the industries related to the cotton and textile sector.”
Published in The Express Tribune, November 1st, 2022.
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